Correlation Between Balanced Fund and Icon Information

Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Icon Information at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Balanced Fund and Icon Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balanced Fund Retail and Icon Information Technology, you can compare the effects of market volatilities on Balanced Fund and Icon Information and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Balanced Fund with a short position of Icon Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Icon Information.

Diversification Opportunities for Balanced Fund and Icon Information

0.88

Correlation Coefficient

Balanced Fund  Icon Information

Very poor diversification

The 3 months correlation between Balanced and Icon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Icon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Information Tec and Balanced Fund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Balanced Fund Retail are associated (or correlated) with Icon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Information Tec has no effect on the direction of Balanced Fund i.e., Balanced Fund and Icon Information go up and down completely randomly.

Pair Corralation between Balanced Fund and Icon Information

Assuming the 90 days horizon Balanced Fund Retail is expected to generate 0.56 times more return on investment than Icon Information. However, Balanced Fund Retail is 1.79 times less risky than Icon Information. It trades about -0.06 of its potential returns per unit of risk. Icon Information Technology is currently generating about -0.12 per unit of risk. If you would invest  1,253  in Balanced Fund Retail on December 29, 2024 and sell it today you would lose (35.00) from holding Balanced Fund Retail or give up 2.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Balanced Fund Retail  vs.  Icon Information Technology

Balanced Fund Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balanced Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Icon Information Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icon Information Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Balanced Fund and Icon Information

The main advantage of trading using opposite Balanced Fund and Icon Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Icon Information can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Icon Information will offset losses from the drop in Icon Information's long position.

The idea behind Balanced Fund Retail and Icon Information Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.